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Published 05 April 2023
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6 Tips to Boost Your Financial Wellbeing in the New Tax Year

The start of the new 2023/24 tax year is the perfect time to take control of your finances. And in the current economic climate, that is more important than ever. We asked two tax experts for their top tips for managing your money.

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It is safe to say that 6 April doesn’t hold the same place in the public imagination as 1 January. While New Year’s Day is seen as a fresh start, complete with good intentions and resolutions, for many people the beginning of the new tax year passes by without much fanfare. Yet that shouldn’t be the case.

“We’ve got a cost of living crisis, a huge shift in tax policy, much higher interest rates, and falling real wages,” explains Alice Haine, personal finance analyst at investment platform Bestinvest. “Going forward, everyone needs to be thinking about their personal finances and really taking control. And the start of a new tax year is a great opportunity to do that.”

To help you take control, NerdWallet has put together six tips for managing your money in the new tax year. From checking your tax code to searching for the best savings account, read on to find out more.

Stay on top of your tax return

Whether you are a sole trader, a freelancer, a landlord, or earn over £100,000 a year, you should keep on top of everything you need for your Self Assessment tax return from 6 April, says Haine. “There’s a lot of information that goes into a tax return and the sooner you start collating it, the better.”

And it’s not just to save you from a panic just before the 31 January deadline for submitting your Self Assessment tax return online. “Getting your hands on all this paperwork puts you in quite a unique position,” says Haine. “There’s nothing to stop you from filing your tax return straight away, and if you’ve paid too much tax, getting a tax rebate.” 

Technically, once the tax year comes to an end on 5 April, you can file your tax return straight away, even though in theory you have until 31 October to send in a paper return and over nine months before the official online deadline. 

Check your tax code

Even if you don’t need to submit a tax return to HM Revenue & Customs (HMRC), you should still make sure you are paying the correct amount in tax. And you can do this by checking your tax code online. Your tax code is used to work out how much income tax is taken from your pay or pension. 

“It’s your responsibility, not your employer’s or HMRC’s, to check your tax code,” explains Haine. “If you change jobs, have a part-time job in addition to your regular job, other sources of income, or you’ve recently retired, tax codes can go askew.”

The best way to check you have the right tax code is by using the government’s online income tax tool. Most people with one job or pension should have the tax code 1257L. The number reflects your personal allowance – so 1257 represents the standard personal allowance of £12,570. The letter, meanwhile, represents how your personal situation affects your allowance. L, for example, is for the ‘standard’ tax-free allowance, while BR means you are taxed at the basic rate and is usually for people with more than one job or pension.

If your tax code is incorrect, you may find you have been paying too much tax and are eligible for an instant rebate. On the downside, you may find you’re not paying enough. Either way, it is important to make sure you are paying the right amount of tax for your income.

Be salary savvy 

For anyone in full-time employment, Tim Warr, partner at chartered accountants Warr & Co, recommends thinking about your salary across a 12-month period.

“People who are employed know what their salary is, they know when their salary is reviewed, so they can make a good guess at what it is going to be for the whole year, and can start planning accordingly,” says Warr. 

“Instead of putting money into a pension scheme, you could put money into an ISA,” he suggests, “with the view of either withdrawing it in March and paying it into a pension scheme, leaving it there, or withdrawing it for general expenditure.” 

Of course, planning for a salary you don’t yet have can be risky. You could up your pension contributions on the assumption you will get a pay rise, for example, only for that not to be the case. So it’s a good idea to plan based on what you are sure will come in, and then think about what you would do if you did receive a pay rise so you can put that extra cash to work right away. 

Be salary smart

At a time when every penny needs to stretch as far as it can, ‘salary sacrifice’ can sound scary. However, it can be a useful way to structure your finances. A salary sacrifice agreement is when you reduce your overall salary in exchange for a ‘non-cash benefit’, such as pension contributions.

“If you get a pay rise and that takes you into the higher rate of income tax, you can ask if some of your salary could be used to increase your pension contributions instead,” says Alice Haine. “It’s a great way to make your pension savings more tax-efficient while reducing your income tax burden.”

Keep an eye on your benefits

Just as you need to think about the tax implications of your salary, you need to check how it interacts with any benefits you are eligible for. Tim Warr highlights the fact that any child benefit you may be eligible for will be gradually reduced once your adjusted net income is more than £50,000. At £60,000 and above, taxpayers will no longer receive child benefit. 

It is a good idea to stay on top of this and opt out of child benefit as soon as you know you’re over the threshold. HMRC will likely get in touch but if there is any delay, you could find yourself having to pay back the extra you’ve been given. 

Warr advises that one way to avoid seeing your child benefit reduced is by putting money in a pension scheme, to bring your adjusted net income below £50,000.

“It’s a case of looking at what your total income from all sources is likely to be for the tax year to 5 April 2024,” explains Warr, “seeing if you are at risk of losing some of your child benefit, and planning to avoid that.”

Make your savings work for you

In the current economic climate, it can be hard to put money into a savings account. But if you are able to save, it is important to make sure that money is doing the best it can.

“If you are saving, you want to think about how you are saving,” says Haine. “You want to make sure you have shopped around for the best interest rate you can find, so you are getting some kind of return on your money.” 

If you are fortunate enough to be able to save larger sums of money, then you could consider cash ISAs or stocks and shares ISAs, both of which you can use to put aside £20,000 a year tax free.  “Having a cash ISA or a stocks and shares ISA now is a really good habit to get into,” Haine explains. “And personal finance is all about healthy habits.”

WARNING: We cannot tell you if any form of investing is right for you. Depending on your choice of investment your capital can be at risk and you may get back less than originally paid in. 

Image source: Getty Images

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